Russia’s largest airport may be fully privatised

The transaction may become the largest deal in Russia’s airport industry (Sheremetyevo)

Rosimushchestvo, Russia’s federal agency with responsibility for the management of state-owned assets, has been approached by Sheremetyevo Holding Ltd with a view to it purchasing the state-owned shares of Sheremetyevo International Airport (IATA: SVO), according to several sources in the Russian government, as revealed to Vedomosti business daily.

With 66.1 per cent of the Moscow airport’s shares currently in the hands of Sheremetyevo Holding, and the further 30.46 per cent owned by the state, Sheremetyevo Holding is in turn owned by Cyprus-registered TPS Avia Holding, 66.22 per cent of which is owned by a trust acting in the interests of SVO’s chairman and member of the board Alexander Ponomarenko and Alexander Skorobogatko, respectively. The remaining 34.7 per cent of TPS Avia Holding is in the hands of Arkady Rotenberg. All three are Russian billionaires and business tycoons.

Sheremetyevo, which serves the country’s Moscow capital, is Russia’s largest airport by traffic numbers. In 2019 it handled some 49.9 million passengers, ranking it as the eighth largest in Europe.

Prior to the consolidation of Sheremetyevo’s assets, initiated in 2015 by Russia’s president and completed in May 2017, Rosimushchestvo controlled almost 100 per cent of the airport. In the course of the consolidation, a private company acquired a control package in exchange for an obligation to build new infrastructure at the airport, especially terminal B, underground tunnels connecting the northern (B) and the southern terminal complexes (terminals D, E and F), and a new cargo terminal as well as a refuelling complex. All of these projects required an investment of some US$750 million and were completed between 2017 and 2018.

According to the existing agreements, Sheremetyevo Holding has the right to purchase the state-owned shares.

Although no estimate of Sheremetyevo’s assets was disclosed during the consolidation, industry analysts assess the value of the government’s share at some US$1 billion. Should the sale of state-owned shares materialise at this price, it would mark a record-setting deal in Russia’s airport industry.

Sheremetyevo’s private shareholders have always been open about their intention to purchase the state-owned share of the airport, and held negotiations with several potential international investors for the sale of a similar sized package of its shares, which would allow them to choose the business partner. As such, a reliable co-investor would enable Sheremetyevo to develop the airport more efficiently.

But buying a state-owned asset can take a notoriously long time. The consolidation of Sheremetyevo coincided with a similar process at Vnukovo International (IATA: VKO), Russia’s third-largest airport. Vnukovo’s consolidation finally resulted in Rosimushchestvo retaining control of the package, whilst 75 per cent less one share was acquired by companies owned by Russian businessman Vitaly Vantsev and Vladimir Skoch. Vnukovo’s private shareholders initiated the process of buying out the remaining shares from the state in the spring of 2018, but the project is still in progress.

In April 2019, Qatar Airways entered into a memorandum of understanding to acquire up to 25 per cent of Moscow’s Vnukovo airport. The agreement has still not been finalised.